Although the Confederation maintained that Ireland's economy is not heading for a recession at this time, it is experiencing a sharp slowdown and goverment over-expenditure will see the economy spiral out of control.

IBEC says: 'Public spending is increasing at a rate six times that of revenue growth. If this trend is not reversed it will be disastrous for all of us. We cannot go back to living beyond our means as we did in the late seventies and eighties with appalling consequences for competitiveness and employment.'

'It requires little imagination to see that spending growth of almost 25 per cent, with tax revenue growth of only 4 per cent can lead to financial disaster if allowed to continue ... Government now has no option but to take a firm stand on spending, prioritise and deliver a service based on necessity, quality and value for money,' the Confederation added.

It was reported last week that Taoiseach Bertie Ahern is playing down concerns over the forthcoming budget, but despite having publicly stated that there was no question of the government reneging on tax promises as a result of the expected surplus shortage, he refused to be drawn on the issue of a possible 2% reduction in the top income tax rate. However, although the government has not yet publicly addressed IBEC's concerns, it has emerged that Finance Minister Charlie McCreevy has warned his cabinet colleagues to scale down their spending plans.